Governance
SOMPO’s evolving governance
Sompo Holdings is changing rapidly on many dimensions. Transformation of its existing businesses, creation of new business platforms, and expansion in new markets and businesses outside of Japan. All this requires effective strategic planning, risk taking, and investment as both a business group as a whole, and as a member of different markets and communities. This in turn requires an organization with a clear overall vision, where executives are empowered and informed in enable effective decision making, and where knowledge and best practices are shared throughout the group to create synergies of growth for the future. One of the key enabling factors for this is good governance - the ability to be transparent, accountable, and objective. Governance, an integral part of the group’s management and transformation, is a topic of constant debate and discussion within SOMPO. This dialogue was held so that our stakeholders can get an inside look into what governance means to us and how we are constantly striving to improve it.
This dialogue was coordinated by Dr. Scott Trevor Davis, Sompo Holdings board member, chair of the Nominations Committee, and a professor at the College of Business, Rikkyo University.
(1) The “Why” that drives the mission and strategy of transformation
Davis Many companies are feeling the pressure to change their business models as a result of challenges that have become apparent due to shifting trends in the business environment. At Rikkyo University I have developed a framework called the Good Business Initiative which enables corporations to reframe their operations strategically, build business platforms of new and better relationships, and continually realize a shared vision of the common good through purpose driven, transformative innovation. Using this framework I can see that SOMPO has transformed strategically and coherently over the last ten years by always starting its inquiries by asking “why” in response to new challenges and emerging trends in the environment. Through this process SOMPO has established a clear purpose (reason for existence) in its pursuit of a “Theme Park for Security, Health & Wellbeing” on the long term and an approach towards the transformation needed to accomplish this as a process of qualitative evolution. I would like to ask Sakurada-san first, what has driven and enabled this qualitative evolution?
Sakurada The reason is simple – sustainability. The awareness that transformation is essential to increase the sustainability of business and a sense of emergency are the drivers. The starting point was the desire for Sompo Group to remain “indispensable” for stakeholders even up to 100 years into the future. We started to reflect on the fundamental reason for the existence of SOMPO by asking “why.” We cannot say for sure that P&C insurance, the Group’s founding business, would still exist in society as something valuable in 100 years’ time, and it may even disappear. To ensure the sustainability of business, we need to become a reliable company that is “always there to help our customers in their daily lives” and “consulted with by the customers if there is a problem” rather than just a “P&C insurance company” that is needed only when customers face in negative situations such as accidents and disasters. As our discussions progressed, this became a common understanding among the leadership team. I believe that the basic desire of our customers is happiness, that is to live a life with “security,” “health” and “wellbeing” so to become a company that can be “counted on to prolong current happiness” and “dependable even up to the very last days of a customer’s life.” It was inevitable therefore that we not only enhance our capability as a P&C insurance company, but also transform the whole business.
Scott Trevor Davis
Davis How is it possible to maintain this highly intense, ongoing discussion of what is and could be SOMPO’s purpose and unique social contribution?
Sakurada First, it is because the “Theme Park for Security, Heath & Wellbeing” is incomplete. There is still a large gap between the Theme Park that we aspire to realize and the current Sompo Group. If SOMPO were already “indispensable”, stakeholder evaluation would be much higher. Unfortunately 99% of people around the world still have an image of Sompo Group as a “P&C insurance company” and the mindset of a majority of employees is probably also that of an “insurance company.” We have not yet become a company that “turns zero into a positive” which is an evolution from “turning a negative into zero” which has been the conventional role of insurance. Also, even though we are a leading company in Japan’s P&C insurance market, it is a small market when seen globally. Therefore, we are not yet “indispensable” for people around the world.
One opportunity to overcome the current situation is nursing care. Our efforts to put the abstract concept of “security and health” into practice through the Nursing Care & Seniors Business, and to differentiate by utilizing digital technologies are also extremely important for growth, sustainability, and fulfilling purpose. When customers select nursing care services and facilities, unlike insurance policies, they are highly conscious of the “company” that operates the business. Customers check reviews, including word of mouth, by themselves and actually visit the facility to ask questions. Only then do they finally decide that “a facility operated by this company is suitable as their last home.”
SOMPO has become a leading company in the nursing care industry but stakeholder evaluation is polarized. One view is that “SOMPO recorded a net profit but it is a red ocean market, and there is uncertainty about future profitability.” The other reaction is positive commending us for “entering into the nursing care market and addressing this national crisis.”
SOMPO’s stance on addressing social challenges through business is increasingly appreciated, but it is difficult to say that the future value of the business and expectations toward SOMPO are currently reflected in the stock price. Based on this in order to enhance the business continuity of Sompo Group, our challenge is to make future growth both understandable and achievable through the concept of “unrealized financial value.” In the process of addressing this challenge, we have set our goal to become a “real data platformer” that integrates the large amount of data obtained from frontline nursing care for people’s happiness. To expedite realization of our vision, we formed business alliances with Palantir Technologies Inc. which has the best data analytics capability in the world, and ABEJA, Inc. which excels in AI solutions including deep learning. We will execute a strategy to deliver an infrastructure for providing services that combine the nursing facility management knowhow developed by Sompo Group with digital technologies as the new real data platform (RDP) in nursing care to nursing care providers first in Japan. The potential market size in Japan is at least JPY10 trillion and we will expand this revolutionary service platform to neighboring industries to build an ecosystem that contributes to increasing sustainability of society rather than simply competing with other companies. We are currently seeing a good response here as the number of alliances with excellent business partners is increasing. This is entirely different from the past when we only operated the insurance business. I feel that the development and operation of the RDP has now entered this second phase of cooperation with business partners to build ecosystems for the future.
(2) Vigilance for governance
Davis Behind the Group’s ability to practice effective management that maintains objectivity and transparency, the process of deciding what commitments to make to which stakeholders, and engaging in dialogue with individual stakeholders in order to fulfill those commitments, is largely due in my view to SOMPO’s approach to governance as a dynamic, evolving process while also maintaining a sense of urgency. What factors have made this kind of approach to governance possible?
Sakurada The biggest step was becoming a company with committees in 2019. We had a non-mandatory Nomination & Compensation Committee before then, but now both the Nomination Committee and Compensation Committee are comprised only of non-executive directors, neither of which am I a member. This arrangement is highly objective, and impartial. For me this tense atmosphere is a good and constructive thing. I always prepare well to avoid any situations in which I cannot provide a clear explanation to a fundamental question about business management. By virtue of the committees being comprised of non-executive directors, I acquired the habit of pushing myself in advance to be able to explain logically about the “Why” and “What.” To me these independent directors are neither a group of friends nor enemies, but rather people who think deeply and seriously about issues in management issues together with me and who are a source of wisdom and insight for me. I think it is very important to build and maintain such tense yet constructive atmosphere.
(3) Building a “Silo-free organization” with governance
Davis Sompo Holdings, Inc. employs a Business Owner System and a Group CxO System. There is however a view among organizational management experts that this kind of matrix organization is typical of companies in mature business phases caught up at the end of growth curves. However, at SOMPO’s this system is aimed for total optimization and has enabled agile and flexible decision-making and business execution. Why was this kind of group management system built?
Kengo Sakurada
Sakurada I was previously head of both Sompo Holdings and Sompo Japan Insurance. Since the business size and profits of Sompo Japan accounted for a large majority of the group’s total, I thought there was no issue with spending a large part of my time on the management of Sompo Japan. However, I felt that by doing so I would eventually run up against a wall when promoting the Theme Park vision and partnering up with foreign companies and companies in other industries. Therefore, I decided to concentrate on my roles as the CEO of Sompo Holdings and introduced the Business Owner System so that each business company can be managed with relative autonomy. In what is nowadays called a silo organization, the Business CEOs were given great authority and a vertical organizational structure to facilitate quick decision-making and business execution. Since then, I have monitored the strategy and management of each business, and have been in charge of the overall management of Sompo Holdings. After a while, however, the daily allocation of my own attention and time became difficult, and early signs of sub optimization became apparent in some individual businesses. A horizontal business structure to look at group-wide matters, including human resources, IT and risk management thus became necessary. I think these kinds of issues back then arising from the fact that the advantages of a holding company structure were not fully realized give rise to a conglomerate discount. Besides, the horizontal lines rather than the vertical lines are crucial for realizing the Theme Park vision. Therefore, the Group CxO System was introduced to make the Business CEOs aware of these horizontal lines and also to create a healthy atmosphere of urgency wherein managers could actually forfeit the capital and human resource allocations to other businesses if they were not vigilant. As a result, it became easier to make the best decisions as a group and implement measures across the group. As the Group CEO, I also recognize that the Business Owner System and Group CxO System are necessary mechanisms to ensure both vertical and horizontal perspectives.
Davis It is often said that the role of governance is to ensure checks and balances. However, a distinct feature of SOMPO’s governance is the Global ExCo which is an advisory body to the Group CEO. I think it offers a highly effective forum for the Business CEOs and Group CxOs to share information and know-how within the group, candidly exchange views without being bound by their own responsibilities or positions, and make high level decisions.
Sakurada I totally agree with you. The mission of each Business CEO is to win in a bottom line competition. Each Business CEO works with pride not only in terms of revenue and profit contribution, but also in the value they deliver to society. The CxOs responsible for the horizontal lines check whether the competition in the vertical line is fair and healthy from the perspectives of capital efficiency, risk management, and human resource development, etc. The mission statement of each Group CxO is also distributed across all Group CxOs so that all of them can make commitments. In addition, it was made clear that the Business CEOs are not the only ones to have clear missions, and that the Group CxOs are also held accountable for results. The Business CEOs and Group CxOs are rivals as well as partners with whom they build cooperative relationships. For example, if the CFO wants to achieve better results, it is essential for them to have a convincing discussion with the business owners. Currently it is very clear to me that healthy competition, mutual understanding and co-creation at the management level is contributing significantly to overall optimization.
(4) Scalability of governance
Global ExCo
Davis Shirakawa-san, you were appointed as the President of Sompo Japan, the core company of Sompo Group, as well we the CEO of Domestic P&C Insurance Business in April 2022, and therefore now also attend the Global ExCo meetings. What is your impression of the Global ExCo?
Shirakawa I think it is extremely beneficial to have not only members based in Japan but also members based overseas to meet and discuss business and synergies. In fact, when I was appointed president, I was almost preoccupied with the domestic P&C insurance business. However, after I started to participate in the Global ExCo meetings and communicate with other members, I became more aware of group synergies, such as those with overseas business operations. When I return to my desk after the Global ExCo meeting, I continue to think about and chose what kind of instructions I should give as the President of Sompo Japan from the perspective of the best solution for the group.
A popular topic at a recent Global ExCo meeting was the Nursing Care RDP. I have been inspired by the leadership team being the first in Japan, and to change the world, by using RDP in the nursing care industry and the discussion about the technologies that make RDP possible. My ambition has gone up one or two levels, since I am in charge of the insurance business.
CxO System
Davis Sompo Japan also recently introduced its own internal CxO System. How do you plan to utilize this system?
Shirakawa Recently, we established a roadmap for transforming the business model of the domestic P&C insurance business segment. The roadmap is a largescale initiative to promote transformation with all departments working together, including human resource management and development, agency training, sales and marketing, and claims. Obviously, it is not possible for every line director or department to respond by simply doing their best, so we would like to fully benefit from the new CxO system to make the most of, and optimize, our effectiveness. We also believe that this transformation will create synergies not only for Sompo Japan but also for the group as a whole, and I will work with the Group CxOs to make us more effective and to revitalize our organization. We hope to accelerate this transformation over the next 12 months or so.
Communication with the Directors
Davis Sompo Holdings has adopted the company with committees models and has one of the most stringent governance structures in Japan. Under this structure the independent directors of Sompo Holdings are given great authority and frequently exchange views with the key members of each business unit. I think one of the distinct features of Sompo Group is that the leadership team has a wide variety of opportunities to frankly exchange views. How do you see this from your position?
Giichi Shirakawa
Shirakawa The directors are very open with the Business CEOs leading the business companies, and I have a direct personality, so I feel that it is easy to build a good relationship. Since we are entering a period when we need to exchange views on group strategy and the business execution plan at a deeper level, being able to communicate freely without being held back by our own responsibility or position will be even more helpful.
Davis There are also things that the directors of Sompo Holdings should bear in mind. The directors should dispel the assumption that “the leadership team understands what we are thinking without us having to say anything” and try to have more careful discussions with the Business CEOs. And since the Business CEOs are given great authority over their own businesses, I think it is critical that they in turn should provide insights into customer needs and organizational issues at places where group wide management is discussed.
Shirakawa As you said, Sompo Japan has the best understanding of the changes that are taking place in the domestic P&C insurance market, and I think it is difficult for Sompo Holdings to gain a real hands-on understanding of this market. So, I also see it as my mission as the Business CEO to thoroughly explain to the whole group the initiatives that will maximize benefits, based on new trends observed in our industry.
(5) Investment: not just about resource allocation but also resource activation under SOMPO’s matrix management
Business Owner System and Global ExCo
Davis Oba-san, as the CEO of the Domestic Life Insurance Business, what do you think are the distinct features of Sompo Group’s management structure and governance that are distinctive when compared with other companies?
Oba The biggest difference must be the Business Owner System. The Business CEOs are given a lot of authority, but this does not mean that they have a free hand to do whatever they want. First of all, there is the overall direction of Sompo Holdings and, based on that direction, I make decisions on strategies, investment allocations, etc. for the life insurance business. There is a fine balance between decentralized and centralized authority under this system, and that system has evolved in a unique way.
Davis What is your approach to the Global ExCo?
Oba The Global ExCo is an invaluable forum because of the balance between centralized and decentralized authority. For me, it is like coordinate axes [a two-dimensional space] for decision-making and business execution. The vertical axis represents the time from now to the future. For example, our goals are backcasted by Narasaki-san, the CEO of Digital Business and Chu-san, the Group CDO, and then discussed at the Global ExCo. Since I tend to be closer to the current situation and the field, the Global ExCo is a forum to check on how well we are moving toward our vision for the future. The horizontal axis represents the scope of our business domains. The Global ExCo is also functioning well as a forum to view the life insurance market in Japan and overseas from a higher viewpoint and to check on whether our strategic execution in the life insurance business is ahead or behind where it needs to be to reach our goals. So, the Global ExCo and Business Owner System work together, and both are essential. Also, Okumura-san was recently appointed as the Group COO and became a member of the Global ExCo, so we began to see a unique “chemical reaction” in our discussions.
Davis I sometimes try to picture how the management and governance of Sompo Holdings would have been now without a forum like the Global ExCo. We would probably end up having long investment meetings taking half day and endless one-on-one meetings, and each business would probably have become impenetrable silos.
Yasuhiro Oba
Oba Looking at our investment strategy, without the Global ExCo, future-oriented investment would have been limited and more emphasis would have been placed on slightly more conservative investments. In other words, future-oriented investment is widely discussed at the Global ExCo. I focus my attention on the future when the investment strategy is being discussed. Because of the Global ExCo, we are able to have discussions that link current business strategies with future goals.
Davis By making bold investments essential for the whole of Sompo Group on the long term, means that the life insurance business will also have more options for future strategies and opportunities.
Oba totally agree. I would like to deliver exciting investment opportunities that increase business possibilities at the Global ExCo. Investments that include digital innovations are particularly important. We will also continue promoting DX [digital transformation] in the life insurance business and contribute to using RDP in group companies.
(6) Group advantage of having a “big picture”
Davis The nursing care & seniors business has the shortest history within Sompo Group, but I feel that it is developing at the fastest speed. The role of the nursing care business is increasingly important in addressing the challenges of aging society. Tell me about the changes you have observed in the frontline over the past few years.
Endo I used to work in insurance, and compared with that experience, the nursing care business is clearly attracting attention from society, and I think the employees feel that their job directly contributes to addressing the social challenges that Japan is facing. Four hundred and forty new graduates joined in fiscal 2022. Approximately 70% of them decided to join the company because they wanted to return something to society, as their grandparents devoted a lot of attention to them during their childhoods. We currently have about 25,000 employees, and many of them find it motivating to see the seniors smile. I have a renewed feeling that Sompo Group entered a good business field.
I still cannot forget the words of Sakurada-san, the Group CEO, when we entered this business. He said that “there is no need to think about synergies with P&C insurance, so just think about becoming a top player as a nursing care provider.” This separation was necessary because once we become aware that “this company is Sompo Japan’s business partner” with our subcontractors and business partners, we might not be able to make the best decisions. I always keep his words in mind to keep our strategy clear.
Davis So Sakurada-san did not enter the nursing care business to boost the immediate short term performance of Sompo Group, but rather he was aware of the need for a qualitative transformation of the nursing care industry and a service provider that does its best for that purpose.
Endo As Sakurada-san pointed out, employee development is the key to becoming a top player. The work environment at that time was not so good, and employee education was not up to par. Therefore, I decided to start by providing wide-ranging education for our employees.
I now feel that Sompo Care Inc. is in the top tier of the industry for both business size and quality of service. The employee turnover rate, which used to around 25%, has improved to around 11%. We have increased the compensation and salaries of caregivers working at Sompo Care so that they are comparable to the average salary for a nurse. This level has “perked up” the whole industry. The Japanese government pays attention to the initiatives of Sompo Holdings and Sompo Care, and has invited us to participate on several committees. I feel that Sompo Group is helping to resolve challenges associated with aging by improving the quality of nursing care, while protecting people against risks through insurance.
Global ExCo
Davis You are the CEO of Nursing Care & Seniors Business and therefore also a member of the Global ExCo, so tell me about the advantages of this forum and your experience of it to date.
Ken Endo
Endo A diverse group of members from around the world participate in Global ExCo discussions. We discuss the same topic, including the vertical and horizontal business lines, such as P&C insurance, life insurance, and nursing care, which I think is an approach that is unique to SOMPO. Taking the example of nursing care, five or six years ago some members might have viewed SOMPO as entering a risky business. However, the majority of Global ExCo members are now very interested and want to know more about nursing care. The biggest advantage of Global ExCo meetings is that we can fully discuss the businesses and value creation that mesh with group strategy. For example, it is extremely important to understand and reflect on the business, investment plans, etc. of Sompo International before adapting them to another business. Topics such as the new styles of working and My Purpose could be different in insurance and nursing care, but it is a big advantage that we can discuss them together.
Looking at governance at Sompo Holdings, the leadership team is selected from a global perspective and includes members with diverse backgrounds. The team develops investment plans and, for example, we have invested in the nursing care business and other non-insurance businesses seven years ago. I think this is symbolic of SOMPO’s governance.
Group CxO System
Davis Please tell me about the progress of the Nursing Care RDP.
Endo We will announce the sales plan and product lineup on IR Day in November this year. We will start by promoting the Nursing Care RDP to nursing care providers, and then explore the possibility of using this in the Digital Garden Cities initiatives (smart cities) for local governments. Palantir’s technology for big data analytics will be one of the key elements in this plan. We will develop solutions that allow people to gather and analyze care records, including diets, predict changes in physical conditions in three months’ time, and then develop strategies. Palantir’s technology is a major differentiating factor for us in this industry.
Davis Only Sompo Care was able to partner with Palantir in the nursing care industry undoubtedly because Narasaki-san who was then the Group CDO deeply understood the importance and potential of the nursing care business that we’re constantly discussing, and noticed the affinity with Palantir’s technology. I believe that this sort of positive creative energy will continue to grow for as long as the CxO deeply understands the perspective of the Business CEOs.
Endo The Nursing Care RDP has the potential to change the world. I believe that the value delivered by the Nursing Care RDP can contribute directly to addressing the high-priority social challenges facing Japan and could have a positive impact on national policies.
Davis If we did not enter the nursing care industry, Sompo Group would have looked quite different now. And the Group CDO probably would not have been as powerful as he is now.
(7) Non region specific governance
What makes SOMPO different is a shared big picture, that is, not just Japan “and” or “versus” overseas.
Davis Everyone in Japan for years has been talking about the importance of being global. As the CEO of Sompo International Holdings Ltd. how do you see the global needs of SOMPO and their achievement to date?
Shea We are already a significantly global and scaled P&C insurer. The difference with other carriers is our dependency on the Japanese marketplace. In FY2021total premium written by Sompo Group were larger than many global firms, but few realizes this. While we are pleased with the present situation we need to balance the portfolio geographically and generate more income from outside of Japan. The only way to achieve this is to grow our customer base internationally while always maintaining a focus on the bottom line.. Our strategy is to grow our customer base both in our existing and new geographies and contribute more operating income to the Sompo Group from the Overseas business and to establish the SOMPO brand in the global insurance market. Such purpose and strategy for growth are exciting propositions for our employees.
Global ExCo=Transformation of corporate culture
Davis You participated in the Global ExCo a couple of times. I also observe the meetings and can say with authority that every single time, the level of the game increases. Can you tell me what you got out of it and how the Global ExCo is working for the business and organization of Sompo International?
James Shea
Shea The Global ExCo is a great forum. Coming to Tokyo for the week of Global ExCo affords me many opportunities on both ends of those meetings to meet and develop relationships with the other ExCo members and senior leaders. I believe Sakurada-san would like even more debate among the members and I believe this is happening. Senior leaders are encouraged to ask challenging questions which I think that is good. Constructive challenges and open debates and not just a forum to disseminate information will result in the best outcomes and ensure our strategies align with group priorities.
Real challenge is when I go back home and meet with the leadership team of Sompo International to make sure that the information and what we have talked about are disseminated to them, and they in turn inform their teams. If this doesn’t happen we lack consistency and focus. I am also encouraging the leadership team of Sompo Internationalto visit Japan and meet the their colleagues. I believe it would send a strong message to host a Global Exco meeting outside of Tokyo and showcase our business in those markets.
Davis In the past in most Japanese organizations, decisions were generally made in advance, with the meetings more like a sort of ritual to go through the list, and check and confirm them in the meeting. But here at SOMPO, we are seeing serious debate about important things related to group strategies on a face to face level.
Shea I am aware of this process and I do think it still happens within SOMPO but to a lesser extent and moving in the right direction. Debate and discussion are critical to making good decisions. Senior leaders need to reach into the organization and talk to a broad number and levels of employees to understand what is happening where the business gets done. Some of the best meetings that I have is when I go to an office and say I want to talk to employees who has been here less than a year. They often have less filter and will tell you exactly what they think because they are not worried about any repercussions or retaliation. I believe the same candidness exists when speaking with employees of various levels in Japan. Based upon some of conversations they told me what they would like to see more change, and are interested in what is happening overseas. I believe the next generation of employees would like to be compensated for performance and value creation. I think they would also be willing to take greater risk to transcend the existing promotion system and convention. Our job is not to tell Sakurada-san what we think he wants to hear. We should tell him what we think.
Evolution of the global business through SOMPO’s transformation
Davis How do you want to contribute to the Global ExCo to make it even more effective?
Shea I think there is not enough understanding of how our business is conducted overseas. Much of our business at Sompo International is done through intermediaries and our competition is very different than it is in Japan. How we need to distinguish ourselves overseas is therefore different than how we need to distinguish ourselves in Japan. We all share the same objectives but how we go about achieving will have both a consistency of priorities (Purpose, Customers, Profit) but will differ in terms of the “how” we achieve them.
For Sompo Group to be successful as a global organization, we need to have a globally minded leadership team. This team does not have to be experts an expert in a particular business but they have to be curious and open mind. I will continue to communicate what is working in our markets to attract customers to SOMPO and where we need to focus our resources to successfully execute on our strategies.
Davis In recent years, SOMPO International’s management and governance have undergone a rapid evolution. In 2017, Endurance joined the Sompo Group, and its founder, John Charman, became the head of SOMPO International. Please tell us about the impact of this very significant change and John Charman’s legacy for the Sompo Group as a whole.
Shea Over my 25+ year career I have had many roles across three companies. Each time I moved into a new role or responsibility I have had the feeling that I didn’t finish the job. It is important to realize that this is normal. You take it from A to B, someone else takes it from B to C, and then someone else takes from C, etc. It is never done and it is always evolving. I think John Charman’s contribution, his legacy, was absolutely critical in doing what he did in the A to B phase. I believe he created a business that can rank and compete with any peer in our industry by focusing on the culture of underwriting, people and applying technical expertise to everything we do. He did it intentionally and quietly. I was surprised Sompo International became a $13-$14 billion business. I believe John knew that the next stage is now to be a little bit louder. He had brought it all together, successfully merged, pointed the business in the right direction, and steered through some difficult markets. And now we need to leverage this base to grow our customer base and increase our contribution to the Group.
My role is now is to take Sompo International to the next level. How we combine the positive features of a large company with what we already have.
Davis I think one part of Mr. Charman’s legacy for SOMPO was that he demonstrated that in different areas in different businesses, there are other forms of governance that are different, but also incredibly effective. And SOMPO was able to learn from that and benefited enormously. But things change, some things have to change. As you said, the job is never finished.
(8) Governance for creating the right future
Davis How do you interpret transformation at SOMPO?
Koichi Narasaki
Narasaki SOMPO is trying to change to win the game in the future and reach a higher position, not just protect the current position. This is transformation for SOMPO. What we are trying to do is transform ourselves. Unlike other companies that are trying to avoid mistakes at all costs, we are trying to change the game.
I think this kind of change leadership—turning transitions in society and in the times into opportunities—is built into SOMPO. If we were in a different company. this would not happen. Certainly, if this was not how we operated, we would not have made a major investment in Palantir Technologies.
Davis So, you are saying that somebody with deep experience in digital technology is used to looking at the big picture of society and industry, and then thinks ahead and sees a worldwide view. Tell me about the digital strategy to promote transformation at SOMPO.
Chu I think SOMPO is a company that is changing insurance and nursing care. Peter Drucker said that “the best way to predict the future is to create it.” That is what we are doing at SOMPO.
There are three “horizons” in our digital strategy. One is the digital transformation (DX). It is the core and also fundamental. Probably 80% of my work right now is to make sure that we make the X (transformation), that we measure the X, and that we see the impact of DX across all of our businesses and that we use the horizontal approach.
Horizon two is the RDP, or taking what we have learned and introducing a new service model to the rest of the industry created from the data that we collected through business, for example, in a core business like nursing care. So, we not only upgraded the 400 nursing care facilities of Sompo Care, but we also have the opportunity to upgrade the other 60,000 nursing care providers in this industry in Japan, and to help the Japanese economy be more productive and more efficient.
Beyond that, we have horizon three or Web 3.0, where we really look at where things are going to be in five to ten years. That is what Narasaki-san and I have been talking about. Some of the core technologies of Web 3.0, such as blockchains, smart contracts, and tokens, are working and have the potential to completely change industries, especially finance and insurance. So, we are anticipating changes and experimenting with them so that we can create viable businesses in the future. Our aim is to be ready when the shift takes place on a large, mainstream scale and to be the leader in providing insurance products and services quickly during the Web 3.0 economy.
I am confident that there is no insurance company in the world that has such a comprehensive view of the future and how we are really helping create it together using a digital strategy. So, my point here is that Narasaki-san and I are here as members of SOMPO’s leadership team to create the future using this three-horizon strategy.
Albert Chu
Narasaki We are able to execute this strategy because we have good governance based on the balance of close communication among the leadership team and mutual understanding. In fact, there are three strengths. First, we have Sakurada-san, a visionary leader. He always asks us about what we are doing, right down to the smallest detail. Also, he is very accessible, to an extent that just does not happen in other companies.
Second is the Board of Directors of Sompo Holdings. We are in close communication with the Board about what we are trying to accomplish. As well, we discuss extensive opportunities with the Board and how the Board is thinking about the way forward and what is expected of us. Third is the Global ExCo. The remarkable thing about SOMPO’s Global ExCo is that there are no politics or politicking. At the Global ExCo, we talk openly about all the key metrics as well as the significant problems, and decide whether we agree or disagree. The Global ExCo is open to all Business CEOs and Group CxOs as well as to Sompo Holdings’ Board members. So, everyone has a deep understanding of what is going on for every major topic in the group’s business management. The level of transparency and a balanced view are incredibly important for us.
Without any one of these three strengths of SOMPO’s governance, nothing that we have accomplished to date would have been possible. We would not have been able to see this far into the future and act without the three strengths.
(9) Governance is about people. That is why “I (inclusion)” is placed above “D (diversity).”
Davis As I listened to the wide range of topics discussed today, I strongly felt that the key to good governance is having excellent human resources and that this also hinges in the quality of the method of succession planning for the Group CEO. At SOMPO I know that the concepts of diversity, fairness and sense of belonging are deeply incorporated into succession planning and that Sompo Group has worked hard to create its common goals and purpose, and to attract people of diverse backgrounds and values and ensure that they are active in a culture of transformation within each business company. Why are you putting so much emphasis on human resources?
Sakurada If the only approach to human resource management is diversity, then simply being different is enough to be good. Taken to the extreme it means that an anarchic state where everything was totally inconsistent would be best. This is why an organization needs the inclusivity in order to take in and accept diversity. There is no purpose in an organization which is incapable of including and spanning differences – there could be no mission. While it is important that everybody should be able to go about things in their own way, there must to be something within Sompo Group that unites us toward common goals and missions, something which I believe is purpose. By establishing a specific overall purpose for SOMPO, I seek to build an organization of talented individuals who can create and achieve their own purpose. This is why we need to focus on human resources. Inclusion is a prerequisite for such group, but the more diverse they are, the more interesting the company becomes. In the end, what matters the most is people. People and companies are constantly evolving. While business management has a life of its own, we make it mission-driven with purpose and diversity. For me, the framework that enables this at Sompo Group is governance.
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